Your home is probably the biggest investment you’ll ever make. When you arrange a mortgage with a financial institution, they must ask you if you want to insure your mortgage through them. But mortgage insurance from your bank or mortgage lender may not be your best alternative.
Life insurance gives you more options and greater control over your mortgage protection. Let’s compare mortgage lender insurance to purchasing life insurance personally:
1. Mortgage Insurance (MI): Your insurance covers only your mortgage balance. Life Insurance(LI): You can choose from different types of insurance (i.e. term or permanent) with a death benefit to cover more than just your mortgage.
2. MI: Even though your mortgage debt reduces over time, your premiums remain level. LI: Your coverage amount does not decrease over time unless you choose to change it.
3. MI: If you die only the outstanding balance on your mortgage is paid off.
LI: If you die, the death benefit is paid to your beneficiary who can use it as they see fit, not just to pay off your mortgage.
4. MI: The mortgage lender is automatically the beneficiary.
LI: You name the beneficiary.
5. MI: If you take your mortgage to another company, you may lose your existing mortgage insurance and may be required to re-qualify for new mortgage insurance.
LI: If you take your mortgage to another company you keep your existing insurance, so you don’t have to re-qualify.
6. MI: You lose all your coverage when your mortgage is repaid, assumed or in default.
LI: As long as premiums are paid your coverage remains.
7. MI: You have no flexibility to change your coverage as your needs change.
LI: If you decided you need coverage only until your mortgage is repaid but later realize you require coverage for other needs, you can convert your insurance to a permanent plan.
Stuart Kirk is a Wealth Advisor with Precision Wealth Management. The opinions expressed are those of the author and may not reflect those of Precision Wealth. For comments or questions Stuart can be reached at firstname.lastname@example.org, 250-954-0247 or www.precisionwealth.ca